BNY Mellon Profit Climbs 12% as Market Rally Increases Assets, Boosts Fees
BNY Mellon Profit Climbs 12%, Market Rally Increases Assets
Jonathan Fickies/Bloomberg
The Bank of New York Mellon Corp. headquarters building stands in New York.
The Bank of New York Mellon Corp. headquarters building stands in New York. Photographer: Jonathan Fickies/Bloomberg
Bank of New York Mellon Corp. (BK), the world’s biggest custody bank, reported a 12 percent increase in first-quarter earnings as a rising stock market lifted assets and the fees for overseeing them.
Net income climbed to $625 million, or 50 cents a share, from $559 million, or 46 cents, a year earlier. Analysts had expected the New York-based company to earn 56 cents a share, according to the average of 13 estimates in a Bloomberg survey.
“The fee-based banks like Bank of New York have real revenue growth at a time when other banks don’t,” Gerard Cassidy, an analyst with RBC Capital Markets in Portland, Maine, said in a telephone interview before the earnings were released. Cassidy rates the stock “outperform.”
Assets under custody and administration rose 14 percent to $25.5 trillion, helping offset earnings from money funds and fixed-income investments that have been hurt by interest rates near zero. Bank of New York Mellon and rival State Street Corp., the third-largest custody bank, together spent at least $4.4 billion on acquisitions over the past year to add assets and expand abroad.
State Street, which is based in Boston, said today that first-quarter profit on an operating basis rose 19 percent to $439 million. Net income fell to $466 million, or 93 cents a share, from $492 million, or 99 cents, a year earlier, when earnings were boosted by the sale of securities the bank had previously written down.
Expanding Abroad
Northern Trust Corp. may post a 0.6 percent increase in profit when it reports earnings at 7:30 a.m., according to the average estimate of 13 analysts. The Chicago-based firm is the fourth-largest custody bank. JPMorgan Chase & Co. in New York is the second-largest.
Custody banks earn fees for keeping records, tracking performance and lending securities to institutional investors such as mutual funds, pensions and hedge funds. U.S. firms, the largest in the business, have expanded in Europe, where the market is more fragmented and banks have been selling custody units to strengthen their balance sheets.
State Street added the securities-servicing unit of Italy’s Intesa Sanpaolo SpA for 1.28 billion euros ($1.82 billion) in May, Mourant International Finance Administration in the U.K.’s Channel Islands in April of last year, and Bank of Ireland’s investment-management business in January of this year.
Bank of New York Mellon bought Germany’s BHF Asset Servicing GmbH for 253 million euros in August, and acquired Pittsburgh-based PNC Financial Service Group Inc.’s investment- servicing business for $2.31 billion in July.
Assets Rise
Assets under management rose 11 percent to $1.2 trillion. The money-management unit attracted $31 billion in net long-term deposits.
Bank of New York Mellon in March hired Jack Malvey, a former Lehman Brothers Holdings Inc. analyst, as chief global markets strategist. It named BlackRock Inc. (BLK)’s Curtis Arledge as chief executive officer of its asset-management unit in August, filling a role left vacant when Ronald O’Hanley departed to become president of asset management at Boston-based Fidelity Investments.
Revenue rose 8.5 percent to $3.65 billion. Foreign exchange and other trading revenue fell 24 percent to $198 million, driven by lower volatility and declines in fixed-income and derivatives trading, the bank said.
Raising Dividends
Bank of New York Mellon declined 3.3 percent this year through yesterday, compared with the 0.1 percent decline for S&P’s index of 17 custody banks and asset managers. State Street lost 3.6 percent and Northern Trust fell 7.2 percent.
Bank of New York Mellon and State Street raised their dividends last month and announced share buybacks, after the Federal Reserve approved the measures following a review of banks’ financial strength. Both cut their payouts to investors in 2009 after plunging financial markets hurt earnings.
The Standard & Poor’s 500 Index, the benchmark for U.S. stocks, has gained 9 percent in the past year, boosting fees of asset managers and custody banks.
All three independent custody banks sold preferred shares to the government in 2008 as part of the Treasury’s Troubled Asset Relief Program, an effort to inject cash into the banking system during the worst months of the credit crisis. BNY Mellon received $3 billion, State Street $2 billion and Northern Trust $1.58 billion. The banks repurchased the shares in 2009.
To contact the reporters on this story: Charles Stein in Boston at cstein4@bloomberg.net; Christopher Condon in Boston at ccondon4@bloomberg.net
To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net
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